The Impact of Corruption on Some Aspects of the Economy

Basem Elmukhtar Ertimi, Mohamed Ali Saeh

Abstract

Theoretical and empirical debate on the impact of corruption on the economy remains unclear. Many studies on corruption seem that the world is occupied by two kinds of people, "sanders" and "greasers”. It depends on what the meaning of "corruption" is for them. Some scholars argue that corruption is an obstacle to economic growth, whereas others believe that corruption can (in some circumstances) endorse growth. Corruption also has a negative impact on investment, Foreign Direct Investment, and economic development as a whole. Measuring corruption is still an issue for most economists due to the difficulties of defining it, and also different forms of corruption require different objective measures. Nevertheless, recently, some measures of corruption have been widely accepted and recognised by researchers. This paper is a critical review at these positions by reviewing the theoretical literature on the impact of corruption on an economy as a whole. It is concluded that there is not enough evidence to support the "greasing the wheels" hypothesis. Instead, this document reviews different measurements of corruption to reveal that corruption is harmful for the economy.

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